How is it that virtually every economic action is labeled a “stimulus” even as the US economy fails to grow at even average rates? Secretary of Agriculture, Tom Vilsack, this week described food stamps as a stimulus program. He claimed that for every dollar increase in SNAP spending, the economy grows by $1.84. I am willing to bet $1,000 with anyone that there is not a $1.84 net stimulus from expanding food stamps. What is more, 90% of all economic “statistics” reported (including this one) are completely made up.
Secretary Vislsack assumes that an increase in food stamps causes people to eat more. This, he states, causes stockers to have to stock more and growers to have to grow more. Wait, this is the same government that says that poor people are obese because of high food prices. High food prices, they say, cause poor people to buy more junk food. If the government were being consistent, they would argue that an increase in food stamps would get poor people to eat healthier and therefore lose weight. Secretary Vilsack is lauding the fact that he thinks the poor will just get fatter, and that this will be “good” for the economy. Rather than being consistent with their reasoning, government would rather be consistent with their answer to all questions: more government spending is better.
If I got $100 in food stamps tomorrow what would I do? Would I buy more food than I am already buying? No. I would use the $100 in food stamps to replace the $100 I would otherwise have spent on food. I would then save the $100 that I would have spent on food to offset the increase in taxes that must follow to pay for the food stamps. In actuality, I’ll have to save even more than $100, because there are government administrative costs created by transferring money from one person to the next (Western Union doesn’t even transfer money for free). Ah, but you say, “poor people won’t save their money!” Maybe not, but they aren’t the ones who will be paying taxes either. Whoever’s taxes get raised (today or tomorrow) to pay for the food stamps will consume less as they must use their income to pay their higher taxes.
What if people get more dollars worth of food stamps than they would have otherwise spent on food? Then, more food gets consumed, either in quantity or quality. In this case, we would be taking money away from people who would have spent it on things they liked and given it to people with the condition that they can’t spend it on things that they want most. That only works to destroy wealth and happiness. For those who are actually starving, the government could always provide multivitamins and soy protein powder. I doubt that it is easy to become obese on such a diet.
The Federal Reserve last week announced that,
“The Committee currently anticipates that economic conditions–including low rates of resource utilization and a subdued outlook for inflation over the medium run–are likely to warrant exceptionally low levels for the federal funds rate at least through mid-2013.”
Yes, the Fed promised to keep pumping up the money supply even as inflation rates have picked up to over 3% on an annualized basis for April, May, and June. Such a move will drive inflation (including food prices) even higher. The government then needs to hand out more food stamps so people can afford to buy more food (to fight obesity) as the Fed increases the price of food to help the government pay for deficit spending such as the food stamp problem. And this stimulates the economy? On what planet? Not this one. The size of government is stimulated, perhaps waistlines are stimulated, but the economy? Nope.
Since March of 2009, the US dollar has lost a third of its value vs. the Canadian dollar. This is one of those real economic statistics. There is no hiding the fact that we have “stimulated” wealth destruction. So maybe food stamps are “stimulative” after all, just not in the way you thought the government meant.